thomas more law center, et al. v obama, et al. - 11-117 brief in opposition

8/3/2019 Thomas More Law Center, et al. v Obama, et al. - 11-117 Brief In Opposition

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No. 11-117

In the Supreme Court of the United States

THOMAS MORE LAW CENTER, ET AL., PETITIONERSv.

BARACK H.OBAMA,PRESIDENT OF THE UNITED STATES, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF FOR THE RESPONDENTS

DONALD B.VERRILLI,JR.Solicitor General

Counsel of Record

TONYWESTAssistant Attorney General

MARK B.STERNALISAB.KLEINANISHADASGUPTA

Attorneys

Department of JusticeWashington, D.C. [email protected](202) 514-2217


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QUESTIONS PRESENTED

Beginning in 2014, the minimum coverage provisionof the Patient Protection and Affordable Care Act,Pub. L. No. 111-148, 124 Stat. 119, amended by theHealth Care and Education Reconciliation Act of

2010, Pub. L. No. 111-152, 124 Stat. 1029, will requirenon-exempted individuals to maintain a minimum levelof health insurance or pay a tax penalty. 26 U.S.C.A.5000A. The question presented is:

1. Whether Congress had the power under ArticleI of the Constitution to enact the minimum coverageprovision.

In the event the petition is granted, respondents alsosuggest that the Court direct the parties to address thefollowing question:

2. Whether the suit brought by respondents tochallenge the minimum coverage provision of the PatientProtection and Affordable Care Act is barred by the

Anti-Injunction Act, 26 U.S.C. 7421(a).

(I)


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TABLE OF CONTENTS

Page

Opinions below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

TABLE OF AUTHORITIES

Cases:

Florida v. United States Dept of Health & Human

Servs., No. 11-11021, 2011 WL 3519178 (11th Cir.

Aug. 12, 2011), petition for cert. pending,No. 11-398 (filed Sept. 28, 2011) . . . . . . . . . . . 6, 15, 17, 19

Gonzales v.Raich, 545 U.S. 1 (2005), petition for cert.

pending, No. 11-398 (filed Sept. 28, 2011) . . . . . . . . 15, 17

Hodel v. Virginia Surface Mining & Reclamation

Assn, 452 U.S. 264 (1981) . . . . . . . . . . . . . . . . . . . . . . . . 17

Lawrence v.State Tax Commn, 286 U.S. 276 (1932) . . . . 17

Liberty University, Inc. v. Geithner, No. 10-2347,

2011 WL 3962915 (4th Cir. Sept. 8, 2011) . . . . . . . . 17, 20

Lottery Case, 188 U.S. 321 (1903) . . . . . . . . . . . . . . . . . . . . 11

McCulloch v.Maryland, 17 U.S. (4 Wheat.) 316

(1819) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

NLRB v.Jones & Laughlin Steel Corp., 301 U.S. 1

(1937) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Nelson v.Sears, Roebuck & Co., 312 U.S. 359 (1941) . . . . 17

Printz v. United States, 521 U.S. 898 (1997) . . . . . . . . . . . 17

Sonzinsky v. United States, 300 U.S. 506 (1937) . . . . . 13, 18

Steward Mach. Co. v.Davis, 301 U.S. 548 (1937) . . . . . . . 17

United States v. Comstock, 130 S. Ct. 1949 (2010) . . . 15, 16

(III)


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IV

CasesContinued: Page

United States v.Doremus, 249 U.S. 86 (1919) . . . . . . . . . . 18

United States v.Lopez, 514 U.S. 549 (1995) . . . . . . 11, 15, 16United Statesv.Morrison, 529 U.S. 598 (2000) . . . . . . 11, 16

United States v.Salerno, 481 U.S. 739 (1987) . . . . . . . . . . 12

Woods v. Cloyd W. Miller Co., 333 U.S. 138 (1948) . . . . . . 12

Constitution and statutes:

U.S. Const. Art. I, 8:

Cl. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17, 19

Cl. 3 (Commerce Clause) . . . . . . . . . . . . . . . 7, 9, 11, 13, 15

Cl. 18 (Necessary and Proper Clause) . . . . . . . . . . . . . . 15

Anti-Injunction Act, 26 U.S.C. 7421(a) . . . . . . . . . . . . . . 8, 19

Emergency Medical Treatment and Labor Act,

42 U.S.C. 1395dd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Health Care and Education Reconciliation Act of

2010, Pub. L. No. 111-152, 124 Stat. 1029 . . . . . . . . . . . . 2

Internal Revenue Code, 26 U.S.C. 1 et seq.:

Ch. 1, 26 U.S.C. 1 et seq.:

26 U.S.C.A. 36B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

26 U.S.C.A. 45R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Ch. 43, 26 U.S.C. 4971 et seq.:26 U.S.C.A. 4980H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Ch. 48, 26 U.S.C. 5000 et seq.:

26 U.S.C.A. 5000A . . . . . . . . . . . . . . . . . . . . . . . 3, 13, 18

26 U.S.C.A. 5000A(a) . . . . . . . . . . . . . . . . . . . . . . . . 3, 18

26 U.S.C.A. 5000A(b)(2) . . . . . . . . . . . . . . . . . . . . . 4, 18

26 U.S.C.A. 5000A(b)(3) . . . . . . . . . . . . . . . . . . . . . . . 18

26 U.S.C.A. 5000A(b)(3)(B) . . . . . . . . . . . . . . . . . . . . . 18


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V

StatutesContinued: Page

26 U.S.C.A. 5000A(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 18

26 U.S.C.A. 5000A(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 426 U.S.C.A. 5000A(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 4

26 U.S.C.A. 5000A(e)(2) . . . . . . . . . . . . . . . . . . . . . . 4, 18

26 U.S.C.A. 5000A(f ) . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

26 U.S.C.A. 5000A(g) . . . . . . . . . . . . . . . . . . . . . . . . 4, 18

Ch. 68, 26 U.S.C. 6651 et seq. . . . . . . . . . . . . . . . . . . . . . . . 9

Subch. A, 26 U.S.C. 6651 et seq.:

26 U.S.C. 6665(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 9

Subch. B, 26 U.S.C. 6671 et seq. . . . . . . . . . . . . . . . . . . 9

26 U.S.C. 6671(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 9

Patient Protection and Affordable Care Act, Pub. L.

No. 111-148, 124 Stat. 119 . . . . . . . . . . . . . . . . . . . . . . . . . 1

18 U.S.C. 228 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

18 U.S.C. 2250 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

42 U.S.C.A. 300gg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

42 U.S.C.A. 300gg-1(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

42 U.S.C.A. 300gg-3(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

42 U.S.C.A. 1396a(a)(10)(A)(i)(VIII) . . . . . . . . . . . . . . . . . . . 3

42 U.S.C.A. 18031 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

42 U.S.C.A. 18091(a)(2)(A) . . . . . . . . . . . . . . . . . . . . . . . . . 4, 6

42 U.S.C.A. 18091(a)(2)(F) . . . . . . . . . . . . . . . . . . . . . . . . 6, 13

42 U.S.C.A. 18091(a)(2)(I) . . . . . . . . . . . . . . . . . . . . . . . . . 7, 10


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VI

Miscellaneous: Page

CBOs March 2011 Estimate of the Effects of the

Insurance Coverage Provisions Contained in the

Patient Protection and Affordable Care Act (Mar.18, 2011), www.cbo.gov/budget/factsheets/

2011b/HealthInsuranceProvisions.pdf . . . . . . . . . . . . . . . 4

Centers for Medicare & Medicaid Servs.,2009 National Health Expenditure

Data (2011), http://www.cms.gov/

NationalHealthExpendData/downloads/tables.pdf . . . . 5

Congressional Budget Office,Effects of Eliminatingthe Individual Mandate to Obtain Health

Insurance (June 16, 2010), http://

www.cbo.gov/ftpdocs/113xx/doc11379/Eliminate_Individual_Mandate_06_16.pdf . . . . . . . . . . . 4

Expanding Consumer Choice and Addressing

Adverse Selection Concerns in Health

Insurance: Hearing Before the Joint Economic

Comm., 108th Cong., 2d Sess. (2004) . . . . . . . . . . . . . . . . 5

H.R. Rep. No. 241, 99th Cong., 1st Sess. Pt. 3 (1985) . . . . . 6

Letter from Douglas W. Elmendorf, Director,

Congressional Budget Office, to Nancy Pelosi,

Speaker, House of Reps. (Mar. 20, 2010),

www.cbo.gov/ftpdocs/113xx/doc11379/amendreconProp.pdf . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


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In the Supreme Court of the United States

No. 11-117

THOMAS MORE LAW CENTER, ET AL., PETITIONERS

v.

BARACK H.OBAMA,PRESIDENT OF THE UNITED STATES, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

BRIEF FOR THE RESPONDENTS

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-89a)is not yet reported but is available at 2011 WL 2556039.The opinion of the district court (Pet. App. 97a-120a) isreported at 720 F. Supp. 2d 882.

JURISDICTION

The judgment of the court of appeals (Pet. App. 90a-

91a) was entered on June 29, 2011. The petition for a writ of certiorari was filed on July 26, 2011. ThisCourts jurisdiction is invoked under 28 U.S.C. 1254(1).

STATEMENT

1. Congress enacted the Patient Protection and Af-fordable Care Act, Pub. L. No. 111-148, 124 Stat. 119

(1)


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(Affordable Care Act or Act),1 to address a profound andenduring crisis in the market for health care that ac-counts for more than 17% of the Nations gross domestic

product. Millions of people do not have health insur-ance, yet actively participate in the health care market.They consume health care services for which they do notpay, and thus shift billions of dollars of health care coststo other market participants. The result is higher insur-ance premiums that, in turn, make insurance unafford-able to even greater numbers of people. At the sametime, insurance companies use restrictive underwritingpractices to deny coverage or charge more to millions ofpeople because of pre-existing medical conditions.

a. In the Affordable Care Act, Congress addressed

these problems through a comprehensive program ofeconomic regulation and tax measures. The Act includesprovisions designed to make affordable health insurancemore widely available, to protect consumers from re-strictive insurance underwriting practices, and to reducethe uncompensated costs of medical care obtained by theuninsured.

First, the Act builds upon the existing nationwidesystem of employer-based health insurance that is theprincipal private mechanism for financing health care.The Act establishes new tax incentives for small busi-

nesses to purchase health insurance for their employees,26 U.S.C.A. 45R,2 and, under certain circumstances, pre-scribes tax penalties for large employers that do not

1 Amended by Health Care and Education Reconciliation Act of2010, Pub. L. No. 111-152, 124 Stat. 1029.

2 Because the Affordable Care Act has not yet been codified in theUnited States Code, this brief will cite to the United States Code An-notated (U.S.C.A.) for ease of reference. All such citations are eitherto the 2011 Edition or the 2011 Supplement of the U.S.C.A.


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offer adequate coverage to full-time employees,26 U.S.C.A. 4980H (employer responsibility provision).

Second, the Act provides for the creation of health

insurance exchanges to allow individuals, families, andsmall businesses to leverage their collective buyingpower to obtain health insurance at rates that are com-petitive with those of typical employer group plans.42 U.S.C.A. 18031.

Third, the Act establishes federal tax credits to assisteligible households with incomes from 133% to 400% ofthe federal poverty level to purchase insurance throughthe exchanges. 26 U.S.C.A. 36B. In addition, the Actexpands eligibility for Medicaid to cover individuals withincome below 133% of the federal poverty level.

42 U.S.C.A. 1396a(a)(10)(A)(i)(VIII).Fourth, the Act regulates insurers to prohibit indus-

try practices that have prevented individuals from ob-taining and maintaining health insurance. The Act willbar insurers from refusing coverage because of apre-existing medical condition, 42 U.S.C.A. 300gg-1(a),300gg-3(a) (the guaranteed-issue provision), therebyguaranteeing insurance to many previously unable toobtain it. The Act also bars insurers from charginghigher premiums based on a persons medical history,42 U.S.C.A. 300gg (the community-rating provision), re-

quiring instead that premiums generally be based oncommunity-wide criteria.

Fifth, the Act amends the Internal Revenue Code toprovide that a non-exempted individual who fails tomaintain a minimum level of health insurance must paya tax penalty. 26 U.S.C.A. 5000A (the minimum cover-age provision). That insurance requirement, whichtakes effect in 2014, 26 U.S.C.A. 5000A(a), may be satis-fied through enrollment in an employer-sponsored in-


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surance plan; an individual plan, including one offeredthrough a new health insurance exchange; a grand-fathered health plan; a government-sponsored program

such as Medicare or Medicaid; or similar federally-recognized coverage, 26 U.S.C.A. 5000A(f ).The amount of the tax penalty owed under the mini-

mum coverage provision is calculated as a percentage ofhousehold income, subject to a floor and capped at theprice of forgone insurance coverage. The penalty is re-ported on the individuals federal income tax return forthe taxable year and is assessed and collected in thesame manner as certain other assessable tax penaltiesunder the Internal Revenue Code. Individuals who arenot required to file income tax returns for a given year

are not required to pay the tax penalty. 26 U.S.C.A.5000A(b)(2), (c)(1) and (2), (e)(2) and (g).

The Congressional Budget Office (CBO) has pro-jected that, by 2017, the Affordable Care Act will reducethe number of non-elderly individuals without insuranceby about 33 million. CBOs March 2011 Estimate of the

Effects of the Insurance Coverage Provisions Containedin the Patient Protection and Affordable Care Act 1(Mar. 18, 2011). The CBO has attributed approximatelyhalf of the projected decrease in the number of non-elderly uninsured16 million peopleto the minimum

coverage provision. CBO, Effects of Eliminating the Individual Mandate to Obtain Health Insurance 2(June 16, 2010).

b. Congress expressly found that the minimum cov-erage provision regulates activity that is commercialand economic in nature, namely how and when healthcare is paid for, and when health insurance is pur-chased. 42 U.S.C.A. 18091(a)(2)(A). That assessment


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reflects a number of realities about the health care mar-ket.

First, participation in the market for health care is

virtually universal. Nearly everyone obtains health careservices at some point, and most do so each year. More-over, every individual is always at risk of requiringhealth care, and the need for particularly expensive ser-

vices is unpredictable. Most medical expenses for peo-ple under 65 result from the bolt-from-the-blue eventof an accident, a stroke, or a complication of pregnancythat we know will happen on average but whose victim

we cannot (and they cannot) predict well in advance.Expanding Consumer Choice and Addressing AdverseSelection Concerns in Health Insurance: Hearing Be-

fore the Joint Economic Comm., 108th Cong., 2d Sess.32 (2004) (Prof. Mark V. Pauly, Wharton Sch., Univ. ofPa.). Costs can mount rapidly for even the most com-mon medical procedures, making it difficult for all, andimpossible for many, to budget for such contingencies.

Because the timing and magnitude of health careexpenses are so difficult to predict and thus give rise toan ever-present risk, health insurance is the customarymeans of financing health care purchases and protectingagainst the attendant risks. In 2009, payments by pri-

vate and government insurers constituted 71% of na-

tional health care spending. See Centers for Medicare& Medicaid Servs.,2009 National Health Expenditure

Data, Tbl. 3 (2011).Yet millions of Americans do not have health insur-

ance, either public or private, and instead attempt toself-insure. They actively participate in the health caremarket regardless of their ability to pay. When peopleforego health insurance coverage and attempt to self-insure, they typically fail to pay the full cost of the ser-


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vices they consume, and they shift the costs of their un-compensated caretotaling $43 billion in 2008tohealth care providers. 42 U.S.C.A. 18091(a)(2)(A) and

(F). Congress found that providers in turn pass on asignificant portion of those costs to private insurers,which pass on the cost to families, increasing the aver-age premium for insured families by over $1,000 ayear. 42 U.S.C.A. 18091(a)(2)(F ).

This cost-shifting occurs in large part because, unlikein other markets, those who cannot afford to pay foremergency health care from commercial providers re-ceive it anyway. Numerous state legislatures and courtshave concluded that hospitals cannot properly turn awaypeople in need of emergency treatment. See H.R. Rep.

No. 241, 99th Cong., 1st Sess. Pt. 3, at 5 (1985);Floridav. United States Dept of Health & Human Servs.,No. 11-11021, 2011 WL 3519178, at *111 (11th Cir. Aug.12, 2011) (Marcus, J., dissenting), petition for cert. pend-ing, No. 11-398 (filed Sept. 28, 2011). Reflecting thesame moral judgment, the federal Emergency MedicalTreatment and Labor Act requires hospitals that partic-ipate in the Medicare program and offer emergency ser-

vices to stabilize any patient who arrives with an emer-gency condition, regardless of whether the person hasinsurance or otherwise can pay. 42 U.S.C. 1395dd.

In addition to finding that the minimum coverageprovision regulates economic activity having a substan-tial effect on interstate commerce, 42 U.S.C.A.18091(a)(2)(A), Congress found that the provision is nec-essary to achieving the goals of the Acts guaranteed-issue and community-rating insurance reforms. Thoseprovisions will require that insurers provide coverageand charge premiums without regard to a persons medi-cal history. Evidence from economists, insurers, and


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state regulators established that, absent an ongoing re-quirement to maintain a minimum amount of coverage,that new ability to obtain insurance regardless of medi-

cal history, and at rates independent of health status, would enable many individuals [to] wait to purchasehealth insurance until they needed care. 42 U.S.C.A.18091(a)(2)(I). That dynamic would undermine the ef-fective functioning of insurance markets. Accordingly,Congress found the minimum coverage requirementessential to creating effective health insurance marketsin which improved health insurance products that areguaranteed issue and do not exclude coverage of pre-existing conditions can be sold. Ibid.

2. a. Petitioners are four individuals who did not

have health insurance at the time this suit was filed andthe Thomas More Law Center, of which two of the indi-

vidual petitioners are members. Pet. App. 100a-101a,102a. The individual petitioners acknowledged belowthat they participate in the health care services marketbut declared that they pay for health care expenses as[they] need them. E.g., Mot. for Prelim. Inj. Exh. 5,Para. 3, at 2 (E.D. Mich. filed Apr. 6, 2010) (HyderDecl.). Petitioners contend that Congress may not over-ride their preferred means of financing health carecosts, asserting that the minimum coverage provision

exceeds Congresss commerce and taxing powers. Thedistrict court concluded that the individual plaintiffs hadstanding to challenge the minimum coverage provision,Pet. App. 101a-106a, but upheld that provision as a validexercise of Congresss power under the CommerceClause. Id. at 109a-118a.3

3 The district court did not decide whether the minimum coverageprovision is also independently authorized by Congresss taxing power.


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b. The court of appeals affirmed. Pet. App. 1a-89a.Although the government had originally conceded in thecourt of appeals that petitioner DeMars had standing,

she later notified that court that she had obtainedemployer-provided health insurance. Id. at 9a; Pet. C.A.Supp. Letter Br. 2 (filed May 25, 2011). The govern-ment then moved to dismiss petitioners appeal for lackof standing, and, in response, petitioners filed new dec-larations in the court of appeals on behalf of petitionersCeci and Steven Hyder. Pet. App. 9a. The court of ap-peals accepted those declarations and concluded thatthey established the standing of those two petitioners.

Id. at 9a-15a.The court of appeals noted that the parties agreed

that the Anti-Injunction Act, 26 U.S.C. 7421(a), did notbar this litigation, but explained that because this limi-tation goes to the subject matter jurisdiction of the fed-eral courts, the parties agreement by itself [did] notpermit [the court] to review this challenge. Pet. App.15a. The court went on to conclude, however, that the

Anti-Injunction Act did not apply. Id. at 15a-19a.As the court noted, the Anti-Injunction Act provides

that no suit for the purpose of restraining the assess-ment or collection of any tax shall be maintained in anycourt. Pet. App. 15a (quoting 26 U.S.C. 7421(a)). The

court observed that Congress denominated the assess-ment for failure to comply with the minimum coverageprovision a penalty and that separate provisions of theInternal Revenue Code show that some penaltiesamount to taxes for purposes of the Anti-Injunction

Act. Id. at 15a-16a. For example, Section 6671(a) ofthe Internal Revenue Code provides that any reference

Pet. App. 118a.


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in this title to tax imposed by this title shall be deemedalso to refer to the penalties and liabilities provided bythis subchapter, i.e., Subchapter B of Chapter 68.

26 U.S.C. 6671(a); see also 26 U.S.C. 6665(a)(2) ([A]nyreference in this title to tax imposed by this title shallbe deemed also to refer to the additions to the tax, addi-tional amounts, and penalties provided by this chapter,i.e., Chapter 68). But the court noted that the tax pen-alty established by the minimum coverage provision isnot a penalty provided by chapter 68 of the [Internal]Revenue Code. Pet. App. 17a. Congress placed thepenalty in chapter 48 of the [Internal] Revenue Code,and it did not include a provision treating the penalty asa tax in the title, as it did with penalties provided in

chapter 68. Ibid. Distinct words have distinct mean-ings, the court reasoned. Ibid. Congress said onething in sections 6665(a)(2) and 6671(a), and somethingelse in section 5000A, and we should respect the differ-ence. Ibid.

Turning to the merits, the court of appeals, in sepa-rate opinions by Judge Martin and Judge Sutton, re-

jected petitioners contention that the minimum cover-age provision was beyond Congresss power under theCommerce Clause. Both opinions rejected the premiseof petitioners argument, which is that the minimum cov-

erage provision regulates inactivity. See Pet. App. 24a(opinion of Martin, J.); id. at 63a (Sutton, J., concurringin the judgment). Judge Martin observed that [v]ir-tually everyone participates in the market for healthcare delivery, and they finance these services by eitherpurchasing an insurance policy or by self-insuring. Id.at 24a. He explained that people without insurance arenot inactiv[e], because they actively participate in themarket for health care services and shift substantial


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costs to other market participants. Id. at 26a-28a, 34a-36a.

Judge Martin further explained that the minimum

coverage provision also forms an essential part of the Affordable Care Acts broader scheme of economicregulation, which requires insurers to offer coverageand set premiums without regard to an individuals med-ical history or condition. Pet. App. 28a-32a. Judge Mar-tin noted Congresss finding that, without the minimumcoverage provision, the guaranteed issue and communityrating provisions would increase existing incentivesfor individuals to delay purchasing health insurance un-til they needed care. Id. at 32a (citing 42 U.S.C.A.18091(a)(2)(I)).

Judge Martin explained that [t]he legislative recorddemonstrated that the seven states that had enactedguaranteed issue reforms without minimum coverageprovisions suffered detrimental effects to their insur-ance markets, such as escalating costs and insurancecompanies exiting the market. Pet. App. 32a. Accord-ingly, Judge Martin concluded that Congress rationallyfound that the minimum coverage provision is essentialto creating effective health insurance markets in whichimproved health insurance products that are guaran-teed issue and do not exclude coverage of pre-existing

conditions can be sold. Ibid. (quoting 42 U.S.C.A.18091(a)(2)(I)).

Concurring in the judgment, Judge Sutton stressedthat [n]o one is inactive when deciding how to pay forhealth care, as self-insurance and private insurance aretwo forms of action for addressing the same risk. Pet.

App. 63a. Indeed, he noted that, [i]f done responsibly,the former requires more action (affirmatively savingmoney on a regular basis and managing the assets over


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time) than the latter (writing a check once or twice ayear or never writing one at all if the employer with-holds the premiums). Id. at 62a-63a.

Judge Sutton further explained that attempts toself-insure substantially affect interstate commerce.Pet. App. 53a-54a. Faced with $43 billion in uncompen-sated care, Congress reasonably could require all cov-ered individuals to pay for health care now so thatmoney would be available to pay for all care as itarises. Id. at 54a. Judge Sutton rejected petitionerscontention that the minimum coverage provision sharesthe central defect in the laws at issue in United States

v.Lopez, 514 U.S. 549 (1995), and United States v.Mor-rison, 529 U.S. 598 (2000). Pet. App. 55a. He reasoned

that [h]ealth care and the means of paying for it arequintessentially economic in a way that possessingguns near schools and domestic violence are not. Ibid.(citingLopez, supra, andMorrison, supra).

Judge Sutton also concluded that petitioners pro-posed action/inaction dichotomy is neither workablenor consistent with Commerce Clause doctrine. Pet.

App. 60a-68a. He noted that [t]he power to regulateincludes the power to prescribe and proscribe, id. at62a (citingLottery Case, 188 U.S. 321, 359-360 (1903)),and that [l]egislative prescriptions set forth rules of

conduct, some of which require action. Ibid. (citing,e.g., 18 U.S.C. 2250 (requiring sex-offender registra-tion); 18 U.S.C. 228 (requiring child-support payments)).Judge Sutton explained that an enforceable line is evenmore difficult to discern when it comes to buying healthinsurance and the point of buying it: financial risk.

Ibid. Saving to buy insurance or to self-insure, as [peti-tioners] affidavits attest, involves action. Id. at 63a.


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Judge Sutton therefore concluded that petitionersaction/inaction dichotomy would, at a minimum, pro-

vide no basis to invalidate the minimum coverage provi-

sion on its face, because that dichotomy would not estab-lish that no set of circumstances exists under which the Act would be valid. Pet. App. 52a, 72a-73a (quotingUnited States v.Salerno, 481 U.S. 739, 745 (1987)). Heexplained that, even assuming that there was a categoryof inactivity unreachable by Congresss commercepower and that the uninsured were properly character-ized as inactive, the minimum coverage provision couldconstitutionally apply to individuals who have insurancebut object to maintaining it, such as petitioner DeMars.See id. at 61a. Petitioners theory of protected inactiv-

ity would likewise have no application to individualswho live in states that require, or will in the future re-quire, that individuals have health insurance or to indi-

viduals with insurance that does not meet minimumstandards. Id. at 64a-65a. Thus, Judge Sutton rea-soned, on its own terms, petitioners activity/inactivitydichotomy does not work with respect to health insur-ance in many settings, if any of them and thus could notbe the basis for a facial constitutional challenge to thestatute. Id. at 71a-72a.

The court of appeals (per Judge Sutton, joined by

Judge Graham) held that the minimum coverage provi-sion is not independently authorized by Congresss tax-ing power. Pet. App. 39a-47a. In the courts view, [t]heindividual mandate is a regulatory penalty, not arevenue-raising tax. Id. at 40a. The court acknowl-edged that the constitutionality of a law does not de-pend on recitals of the power which it undertakes to ex-ercise, id. at 44a (quoting Woods v. Cloyd W. MillerCo., 333 U.S. 138, 144 (1948)), but nonetheless thought


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it constitutionally significant that Congress used theword penalty rather than tax in Section 5000A andthat the legislative findings invoked [Congresss] com-

merce power, not its taxing authority, id. at 40a. Thecourt also acknowledged that taxes shape behaviorand that every tax penalizes people by imposing an eco-nomic impediment on one person as compared withothers not taxed. Id. at 45a (quoting Sonzinsky v.United States, 300 U.S. 506, 513 (1937)). It nonethelessconcluded that Section 5000A could not be supported bythe taxing power because Congress had a regulatorymotive rather than a revenue-raising one when enact-ing it. Id. at 41a-42a.

Judge Graham (sitting by designation) dissented on

the Commerce Clause issue, concluding that Congresslacked power under the Commerce Clause to enact theminimum coverage provision. He agreed that petition-ers action/inaction distinction would suffer from thesame failings as the direct and indirect effects test ofprior Commerce Clause jurisprudence. Pet. App. 79a(citing cases). He also recognized that people who at-tempt to finance their health care costs out-of-pocketcollectively shift billions of dollars of uncompensatedcosts to other market participants. Id. at 82a (citing 42U.S.C.A. 18091(F)). Judge Graham nonetheless con-

cluded that the minimum coverage provision is not aproper means of regulating interstate commerce be-cause the requirement to maintain minimum coverage isnot conditioned on the failure to pay for health careservices, or, for that matter, conditioned on the con-sumption of health care. Id. at 84a. He observed that,in the absence of the minimum coverage provision, indi-

viduals would have the right to decide how to financemedical expenses, and concluded that the commerce


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power does not permit Congress to extinguish[] thatright. Id. at 86a.

ARGUMENT

The Affordable Care Act represents the consideredjudgment of the elected Branches of Governmentafteryears of study and deliberationon how to address acrisis in the national health care market. That crisis hasput the cost of health insurance beyond the reach of mil-lions of Americans, and has denied coverage entirely tomillions more. The Act is a comprehensive statute thatbuilds on the system of private and public insurance tofinance health care. It utilizes various regulatory andtax measures to reform insurance practices, extend cov-erage, and address other problems in the health caremarket.

The Act requires that non-exempted individuals fi-nance their health care consumption through insurance,rather than rely on a combination of attempted self-insurance and the back-stop of care paid for by othermarket participants. The minimum coverage provision,like the Act as a whole, thus regulates economic conductthat substantially affects interstate commerce. The pro-

vision is also integral to the rules Congress prescribedto end discriminatory insurance practices that deny cov-

erage to or increase rates for millions of Americans withpreexisting medical conditions. Further, the minimumcoverage provision is effectuated by means of a penaltythat operates as a tax, payable only by those who arerequired to file income tax returns and based on theiradjusted gross income. For these reasons, the minimumcoverage provision is squarely within Congresss powerto regulate interstate commerce, to lay and collect taxes,


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and to enact legislation that is necessary and proper toeffectuate its enumerated powers.

The question presented in this case is clearly impor-

tant, and, after the decision below, the Eleventh Circuitheld (contrary to the Sixth Circuit in this case) that theminimum coverage provision was not within Congressscommerce power. SeeFloridav. United States Dept of

Health & Human Servs., No. 11-11021, 2011 WL3519178, at *24-*68 (11th Cir. Aug. 12, 2011), petition forcert. pending, No. 11-398 (filed Sept. 28, 2011). The fed-eral government is today filing a petition for a writ ofcertiorari challenging the judgment in theFlorida case,and it believes the Court should hold this petition pend-ing a decision inFlorida.

1. The Constitution confers on Congress the powerto regulate Commerce * * * among the severalStates. Art. I, 8, Cl. 3. That power includes the au-thority to regulate intrastate conduct that has a sub-stantial effect on interstate commerce. Gonzales v.

Raich, 545 U.S. 1, 17 (2005). In reviewing the validity ofCommerce Clause legislation, a courts task is a modestone. Id. at 22. The court need not determine

whether the regulated conduct, taken in the aggregate,substantially affect[s] interstate commerce in fact, butonly whether a rational basis exists for so concluding.

Ibid. (quoting United States v.Lopez, 514 U.S. 549, 557(1995)). In addition, by virtue of the Necessary andProper Clause, Art. I, 8, Cl. 18, the Constitutionsgrants of specific federal legislative authority are ac-companied by broad power to enact laws that are conve-nient, or useful or conducive to the authoritys benefi-cial exercise. United States v. Comstock, 130 S. Ct.1949, 1956 (2010) (quoting McCulloch v. Maryland,17 U.S. (4 Wheat.) 316, 413, 418 (1819)). These princi-


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ples reinforce the presumption of constitutionality thisCourt applies when examining the scope of Congressio-nal power. Id. at 1957 (quoting United States v.Morri-

son, 529 U.S. 598, 607 (2000)).The minimum coverage provision is a valid exerciseof Congresss commerce power. It prescribes a rule thatgoverns the manner in which individuals finance theirparticipation in the health care market, and it does sothrough the predominant means of financing in thatmarketinsurance. It directly addresses the conse-quences of economic conduct that distorts the interstatemarkets for health care and health insurancenamelythe attempt by millions of Americans to self-insure orrely on the back-stop of free care, and the billions of

dollars in cost-shifting that conduct produces each yearwhen the uninsured do not pay for the care they inevita-bly need and receive. See Lopez, 514 U.S. at 560(Where economic activity substantially affects inter-state commerce, legislation regulating that activity willbe sustained.). And the minimum coverage provision isnecessary to make effective the insurance market re-forms (guaranteed issue and community rating) that allagree Congress has the authority to impose.

Congresss enactment of the minimum coverage provision thus rests upon direct, tangible, and well-

documented economic effects on interstate commerce(reflected in specific congressional findings), not effectsso indirect and remote that to embrace them * * *

would effectively obliterate the distinction between whatis national and what is local. Lopez, 514 U.S. at 556-557(quoting NLRB v. Jones & Laughlin Steel Corp., 301U.S. 1, 37 (1937)). As Judge Sutton explained, [n]o onemust pile inference upon inference,Lopez, 514 U.S. at567, to recognize that the national regulation of a $2.5


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trillion industry, much of it financed through healthinsurance . . . sold by national or regional health in-surance companies, 42 U.S.C. 18091(a)(2)(B), is eco-

nomic in nature. Pet. App. 55a. The provision does notintrude on the sovereignty of the States; it regulatesprivate conduct, operating on individuals, not States.Cf.Printz v. United States, 521 U.S. 898, 904-933 (1997).It addresses a problem individual States have had diffi-culty solving on their own in the absence of a nationallyuniform insurance requirement. Florida, 2011 WL3519178, at *103 (Marcus, J., dissenting); see Hodel v.Virginia Surface Mining & Reclamation Assn, 452U.S. 264, 281-282 (1981). It is an integral part of a com-prehensive regulatory scheme that the commerce power

plainly authorizes Congress to enact. Raich, 545 U.S. at15-22. And it violates no other substantive constitu-tional limitation. The minimum coverage provisiontherefore falls well within Congresss commerce power.

2. Congresss constitutional power [t]o lay and col-lect Taxes, Duties, Imposts and Excises, Art. I, 8,Cl. 1, provides an independent basis to uphold the Actsminimum coverage provision. The taxing power is com-prehensive,Steward Mach. Co. v.Davis, 301 U.S. 548,581-582 (1937), and, in passing on the constitutionalityof a tax law, a court is concerned only with its practical

operation, not its definition or the precise form of de-scriptive words which may be applied to it. Nelson v.

Sears, Roebuck & Co. , 312 U.S. 359, 363 (1941) (quotingLawrence v. State Tax Commn, 286 U.S. 276, 280(1932)).

The practical operation of the minimum coverageprovision is as a tax. Nelson, 312 U.S. at 363; accord

Liberty University, Inc. v. Geithner, No. 10-2347,2011 WL 3962915, at *16-*22 (4th Cir. Sept. 8, 2011)


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(Wynn, J., concurring) (Liberty University). The provi-sion amends the Internal Revenue Code to provide thata non-exempted individual who fails to maintain a mini-

mum level of coverage shall pay a tax penalty for eachmonth that he fails to maintain that coverage.26 U.S.C.A. 5000A. The amount of the penalty is calcu-lated as a percentage of household income for federalincome tax purposes, subject to a floor and a cap.26 U.S.C.A. 5000A(c). The penalty is reported on theindividuals federal income tax return for the taxableyear, and is assessed and collected in the same manneras other assessable tax penalties under the InternalRevenue Code. 26 U.S.C.A. 5000A(b)(2) and (g). Indi-

viduals who are not required to file income tax returns

for a given year are not required to pay the penalty.26 U.S.C.A. 5000A(e)(2). A taxpayers responsibility forfamily members depends on their status as dependentsunder the Internal Revenue Code. 26 U.S.C.A. 5000A(a)and (b)(3). Taxpayers filing a joint tax return are jointlyliable for the penalty. 26 U.S.C.A. 5000A(b)(3)(B). Andthe Secretary of the Treasury is empowered to enforcethe penalty provision. 26 U.S.C.A. 5000A(g).

It is undisputed that the minimum coverage provi-sion will be productive of some revenue. Sonzinsky v.United States, 300 U.S. 506, 514 (1937). The CBO found

that it will raise at least $4 billion a year in revenues forthe general treasury. See Letter from Douglas Elmen-dorf, Director, CBO, to Nancy Pelosi, Speaker, House ofReps., Tbl. 4 (Mar. 20, 2010). The provision unquestion-ably bears some reasonable relation to the raising ofrevenue, United States v.Doremus, 249 U.S. 86, 93-94(1919), and it is therefore within Congresss taxing pow-er.


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3. The court of appeals properly applied well-settledprinciples in concluding that the minimum coverage pro-

vision was a proper exercise of Congresss commerce

power. After that decision, a divided panel of the Elev-enth Circuit declared the minimum coverage provisionunconstitutional. SeeFlorida, 2011 WL 3519178, at *24-*68. The federal government is today filing a petitionfor a writ of certiorari seeking review of the EleventhCircuits judgment in theFlorida case. For the reasonsstated in that petition (at 14-25), the Eleventh Circuitsconclusion that the minimum coverage provision is be-yond Congresss commerce power was based on signifi-cant errors about the scope of Congresss constitutionalauthority and the nature of the health care market.

Moreover, as explained above, the minimum coverage isindependently authorized by Congresss power to layand collect Taxes. U.S. Const. Art. I, 8, Cl. 1; see pp.17-18, supra. That separate constitutional authorityprovides an alternative ground for affirmance of thecourt of appeals judgment in this case.

In the federal governments view, the Court shouldgrant the federal governments petition inFlorida andhold this petition pending a decision in Florida. Likethis case, Florida presents a court of appeals decisionanalyzing the constitutionality of the minimum coverage

provision under both the tax and commerce power, so itprovides a vehicle for the Court to address both ques-tions if necessary.

The Sixth Circuit in this case expressly addressedthe applicability of the Anti-Injunction Act, 26 U.S.C.7421(a), to petitioners challenge to the minimum cover-age provision, agreeing with the government that thestatutory bar is inapplicable. See Pet. App. 15a-19a.

After the Sixth Circuit rendered its decision, a divided


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panel of the Fourth Circuit reached a contrary conclu-sion on the applicability of the Anti-Injunction Act. See

Liberty University, 2011 WL 3962915, at *4-*16. Al-

though the Eleventh Circuit did not address the Anti-Injunction Act, we do not believe that provides a reasonto grant plenary review in this case, rather than in

Florida. As the government explains in itsFlorida peti-tion (at 32-34 & n.7), the Court can consider the applica-bility of the Anti-Injunction Act in the context of the

Florida case by requesting the parties to brief the issueand appointing an amicus if necessary to file a brief tak-ing the position that the Anti-Injunction Act bars suitssuch as this, or it can grant review inLiberty Universityin the event a petition for a writ of certiorari is filed

there.In sum, it does not appear necessary to grant review

in this case, given the federal governments pending pe-tition inFlorida, and petitioners here would be free tofile an amicus brief on the relevant issues in theFloridacase. While the Court could also grant this petition andconsolidate the cases, that course could complicate thebriefing and presentation of the arguments to the Court,

without a sufficient corresponding benefit. If, however,the Court concludes that it would benefit from a presen-tation of the views of petitioners in this case as parties,

it should grant the petition in this case, consolidate itwith United States Dept of Health & Human Servicesv. Florida, petition for cert. pending, No. 11-398 (filedSept. 28, 2011), and direct the parties to address the ap-plicability of the Anti-Injunction Act.


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CONCLUSION

The Court should hold the petition in this case pend-ing the disposition of the federal governments petition

for a writ of certiorari in United States Dept of Health& Human Services v.Florida, No. 11-398 (filed Sept. 28,2011).

Respectfully submitted.

DONALD B.VERRILLI,JR.Solicitor General

TONYWESTAssistant Attorney General

MARK B.STERNALISAB.KLEINANISHADASGUPTA

Attorneys

SEPTEMBER 2011

thomas more law center, et al. v obama, et al. - 11-117 brief in opposition

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